Muller Wiseman Dairies is the second major processor to launch a formula-based milk contract to its producers.

In line with the dairy voluntary code of practice, the company has circulated new contracts to its Muller Wiseman Milk Group (MWMG) members, and the 381 producers on non-aligned standard litre contracts will have the option to sign up to a new farmgate milk price formula.

The Muller Wiseman formula price will initially be available for nine months from 1 July 2013 to a maximum of 110m litres. Producers will be able to apply to sell a minimum of 10% of their milk volume (based on last year’s figures), with the company set to declare the opening price at the beginning of June.

Milk prices will be set quarterly and calculated based on a formula tracking actual milk price equivalent (AMPE), milk for cheese value equivalent (MCVE) and a basket of competitor milk prices. The weighting for these will be 50%, 25% and 25% respectively.

AMPE was devised by DairyCo to measure market prices for butter and skimmed milk powder, while MCVE provides an indication of the value returned by processing milk into mild cheddar and its associated by-products.

Muller Wiseman Formula Price from 2014 onwards

  • In February each year the company will specify the total volume of milk available to be priced under the formula option
  • Following on from applications by MWMG members, individual offers will be made with contracts starting for a 12-month period from 1 April
  • Prices will be adjusted quarterly based on movements in AMPE, MCVE and the specified competitor basket at a weighting of 50%, 25% and 25% respectively
  • Producers will be given at least one month’s notice in advance of any price change
  • AMPE volatility will be managed with a percentage tolerance, set at +/- 5% of the annual AMPE benchmark.

“Members will get support from the company’s farm services team to understand the principles of the option, and we are developing an online calculator on the members’ website to help them predict trends and track movements to determine whether it is of interest,” said Muller Wiseman Dairies’ agricultural affairs manager Pete Nicholson.

NFU Scotland milk committee chairman Gary Mitchell encouraged Muller Wiseman producers to look at the option and said the union was hopeful other processors would emerge with similar contracts in the coming months.

NFU dairy board chairman Mansel Raymond said: “It is important that determinable milk pricing mechanisms get the support of supply chain customers, to ensure their future success. We now call on all milk buyers to offer farmers contracts that are compliant with the code.”

In March, Dairy Crest launched a formula-based contract for its Dairy Crest Direct non-aligned liquid milk suppliers. Tracking five key costs – bulk cream, retail liquid milk (four pints), concentrates, fertiliser and red diesel – the contract calculates a monthly price.

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